NGPC Contract Changed Hands…

OTO Melara 30mm Marlin RWS

SHAH ALAM: Destini Bhd – one of the few local defence companies listed in the KLSE – has become the builder of the APMM’s New Generation Patrol Craft (NGPC) through the acquisition of the company which originally won the contract.

From the Star (July 23, 2015) :
“KUALA LUMPUR: Destini Bhd will venture into the paramilitary boat segment through its proposed acquisition of Everyday Success Sdn Bhd from paramilitary boat maker Destination Marine Services Sdn Bhd (DMS) for RM90mil.

Colombian Coast Guard 40 metre patrol boat which will be the basis of the NGPC.
Colombian Coast Guard 40 metre patrol boat which will be the basis of the NGPC.

The acquisition, among others, will allow Destini to participate in the RM381.3mil contract awarded to DMS to supply six patrol vessels to the Malaysian Maritime Enforcement Agency (APMM).

Destini, which makes lifeboats, fast rescue boats and life rafts, told Bursa Malaysia that Destini Armada Sdn Bhd – its unit that services marine safety and survival equipment – had signed a conditional agreement to acquire 100% of Everyday Success.

One of the FIC built by BYO Marine Sdn Bhd for APMM.
One of the FIC built by BYO Marine Sdn Bhd for APMM.

The purchase consideration of RM90mil will be satisfied via a combination of cash payment of RM15mil and the issuance of 107.14 million new 10-sen Destini shares at an issue price of 70 sen apiece to pay for the remaining RM75mil. (Destini shares ended trading unchanged at 59.5 sen on Thursday. Its highest closing price this year was 67.5 sen on June 24.)

Everyday Success is currently dormant, with intended principal activities being the provision of shipbuilding and ship repair services. DMS will inject into Everyday Success several identified/agreed assets including the project won by DMS to supply the vessels to APMM within 35 months (from June 15), assets of the shipyard facilities in Klang to implement the project, and and all permits and licences to carry it out.

KM Penggalang 2, one of the two boats built by DMS back in 2007.
KM Penggalang 2, one of the two boats built by DMS back in 2007.

“The proposed acquisition represents a gateway for Destini to further increase its range of products and expand its supply of vessel segment in terms of product complexity, technology, technical knowledge and expertise by venturing into the supply, testing and commissioning of paramilitary boats and its related MRO services to a different market segment pursuant to the implementation of the project,” Destini said.

Apart from making and selling boats and parts, Destini provides maintenance, repair and overhaul (MRO) services specialising in the safety, survival and rescue equipment for the aviation, marine and oil and gas industries.

DMS has guaranteed that Everyday Success’ cumulative after-tax profit will be at least RM25mil in aggregate for the two financial years ending Dec 31, 2015 and 2016.

“Based on the above and the value accorded to 100% equity interest in Everyday Success of about RM90mil, the purchase consideration represents a price-to-earnings multiple of 7.20 times,” Destini said.

It added that the RM381.3mil contract value of the APMM project would provide earnings visibility up to May 2018, and the identified assets would offer future earnings potential.

The proposed acquisition is expected to be completed by the fourth quarter of this year.

The deal to buy over the contract was initially announced on June 25. From the Sun:

PETALING JAYA: Destini Bhd has entered into a heads of agreement (HOA) with three parties to buy Destination Marine Services Sdn Bhd (DMS), involved in boat building, ship repair and marine-related engineering services, for RM90 million.

Destini said the acquisition is a gateway to further increase its range of products and diversify its supply of lifeboat segment by venturing into the supply, testing and commissioning of paramilitary boats and its related MRO services to a different market segment.

“At the same time, Destini would be able to set up its manufacturing facility in Malaysia at the Shipyard Land with ready main infrastructures which is currently owned by DMS,” it said.

The purchase consideration will be satisfied via new shares at 70 sen each in Destini and/or cash.

Under the HOA, Destini will also be given a profit guarantee of RM10 million for 2015 and RM15 million for 2016 to Destini, arising from the project.

Pending the completion of the proposed acquisition, DMS will proceed to award a sub-contract from its project to Destini.

On June 15, 2015, DMS received a RM381.3 million contract from Agensi Penguatkuasaan Maritim Malaysia to supply, deliver, test and commission six patrol vessels which it will sub-contract to Destini valued at RM372.3 million.

DMS signed the LOI for the NGPC at LIMA 2015 beating other established names in the local shipyard industry. And four months later it cashed out!.

Back in 2007, DMS had built two 18 metre boats – designated as Kelas Penggalang – for APMM at its yard at Port Klang. Industry sources told Malaysian Defence that the NGPC is likely to be built at the Port Klang yard which had undergone renovation recently.

As the NGPC is specified to be fitted with a 30mm RWS gun, three gun makers – MSI, Oto Melara and Aselsan – are said to be competing for the contract.

Aselsan SMASH 30mm gun
Aselsan SMASH 30mm gun

Industry sources said Oto Melara which supplied the 12.7mm Hitrole RWS to APMM for the BYO Marine Fast Interceptor Craft (10 boats) is the favourite to win the deal.

The three companies are also expected to be in the mix for the tender to supply 30mm guns for four APMM patrol boats, which closed on July 8. The 30mm guns will be fitted to KM Serasan (Sandakan), KM Memmon (Kota Kinabalu), KM Balong (Tawau) and KM Marlin (Sitiawan). It is unknown whether the selection of the 30mm gun for NGPC will have a bearing on this tender.

KM Marlin. it was donated by Nippon Foundation back in 2013. It was originally used as a training ship but was pressed into patrol in 2014.
KM Marlin. it was donated by Nippon Foundation back in 2013. It was originally used as a training ship but was pressed into patrol in 2014.

I am not sure of the type of boats based in Sabah but KM Marlin was donated by Nippon Foundation back in 2013. Marlin was supposed to be the APMM training vessel hence it was not armed originally but following the Lahad Datu incursion it was pressed into patrol duties.

It must be noted that Destini Bhd was established in 1991 under the name Satang Holdings Bhd as a supplier of aviation tooling and spare parts. Satang was among several local defence companies which in the late 90s were awarded long term contracts to be the giant in their respective fields.

The other companies are Airod (Aviation MRO), SMEO (small arms and ordnance), Deftech (land vehicles), Zetro (electronics), Sapura (communications) and PSC-NDSB (ship building). From the seven, three of the companies namely Deftech, PSC NDSB and Satang have seen a change of ownerships.

The latest generation MSI DS30 30mm gun complete with EO sight and remote operator console.
The latest generation MSI DS30 30mm gun complete with EO sight and remote operator console.

Satang was given the contract for the maintenance of emergency and survival equipment for the Armed Forces and other government agencies. Among the items the company maintained were life raft and flight helmets.

OTO Melara 30mm Marlin RWS
OTO Melara 30mm Marlin RWS

Since its transformation into Destini Bhd, the company had supplied Iveco and Vamtac trucks to the Army and recently FZ rockets for RMAF (signed at DSA 2014).

The latest variant of the Scaneagle, Scaneagle 2.
The latest variant of the Scaneagle, Scaneagle 2.

I have yet to find out whether the Boeing Insitu Scan Eagle UAV have indeed been selected for the NGPC as indicated by the specifications of the tender. Industry sources had told Malaysian Defence it was likely that the number of NGPC to be built will have to be reduce to five if the UAV requirement is maintained.

With the recent slump of the Ringgit against the US Dollar their observations may well be spot on. Which left one to wonder whether it will have been better for APMM to award the tender to a competent shipbuilder instead of one like DMS.

— Malaysian Defence

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About Marhalim Abas 1163 Articles
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21 Comments

  1. Given that the Lekiu class is armed with MSI 30mms and that a newer model (same as on the Darings) is going on the LCS; logic would dictate the same is selected for the MMEA; irrespective of the fact that the RMN and MMEA are separate organisations. Problem is logic often takes a back burner.

  2. “Problem is logic often takes a back burner.”

    Ha ha. You can say that again, Azlan. Yes, I think they should fit the MSI system too. But sometimes the GoM’s defence acquisitions seem to have their own logic that makes my head spin. The result of having too many cooks, I think.

    Reply
    The problem could be solved if the Government instituted the Government Furnished Equipment ruling. However by ensuring only one single vendor for a solution also breeds a monopoly. In the past government agencies could only buy Pajeros from a particular company which led to others complaining. Now it’s free for all. Is it better than the past?

  3. Don’t see any great design from this ship, real pillar and center very blocking operation of Scan Eagle UAV, also by see this ship blueprint dont see much space can use to launch and recovery Scan Eagle UAV and space/store store Scan Eagle UAV launch and recovery tools. and this ship can’t accumulate 40 person max during rescue mission. And this boat only have 5 tons fresh water, means this boat will not stay in sea more than 3 day with design std 24 crew.

  4. Marhalim,

    I think defence acquisition is always going to have problems. As I’ve said in a pre-crash post, I’m for the establishment of a defence acquisition agency.

    Not being a defence economist, I’ve read several reports on defence acquisitions in several countries including Nato and India. Most have now streamlined defence purchasing by forming a single agency responsible for defence acquisition (some even including police/public safety acquisitions). The French were honest and said that their buyers suffered from ‘knowledge gaps’ — meaning they were played out — when making acquisitions. So now they have engineers, systems analysts, etc in their agency. These national agencies have improved the situation but still suffer from delays, political interference, budget over-runs, etc.

    Having said that, an acquisitions agency of our own has still has many advantages. For one, the service chiefs will have to do their homework because they’ll be grilled by the agency on suggested purchases. It will help them to crystallise in their minds how and with what they’re going to defend the country. This is not to say that the’re not capable professionals but all professionals benefit from an examination of their basic assumptions — top surgeons and engineers do it all the time. Second, the treasury will not be the final arbiter on acquisitions made although their rep will of course be in the agency. At the moment any purchase above $50 000 goes to the treasury to be considered. Third, there’s less room for lobbying — a seller may not go to a higher authority to force a purchase, say, of a brand of missiles, not agreed to by the agency. Fourth, for transparency, the SPRM should be represented in the agency. So no more fake chips made in Sitiawan for our frigates.

    A single agency would make it easier for transparency in defence acquisitions. The PAC/Auditor General will know just who to haul up should problems arise.

  5. Something like Sweden’s FMV.

    Insitu has developed a follow on to Scaneagle; no doubt CTRM will offer this for the MMEA requirement. Ideally, imagery from the UAV will be able to be steamed not only to the “mothership” but also to other ships but this is probably hoping for too much.

    Can’t remember who but at least one country operates its Scaneagles from a lorry. Another UAV in the same class category is the Seeker; a Saudi example was lost and captured by the Houthis. The RTA uses Ravens with its artillery.

  6. Ferret,
    Spending too much but doing too less is indeed the problem but the solution is not to set up yet another civil agency. We are facing an organisational meltdown, from top to bottom. The whole organisation has no moral to drive the self-motivation towards professionalism that is capable of managing and operating modern equipment. One may argue they are good people, but an organisation is not made with a few individuals. We need the military to initiate to straight up itself.

    Since last 2 decades, in the disguise of outsourcing, they are rapidly losing the never been great engineering capability. Everything they procure when shit arises, no one is taking responsibility. If it can be cover up-ed until the next schedule maintenance, which btw will be taken care by OEM, it will be covered. If it cannot be covered, just let it inoperational and blame OEM for slow spares. Talking about slow spares, it is not uncommon to see last minute PO asking for almost next day delivery for parts that are known to have lead time counted in months. Even if the OEM is kind enough to entertain or either as a loss lead, they are certainly not for charity and will cost dearly. While they seems to be cheated by the worst OEM in the galaxy, their civil counterpart is trashing the supposedly delicate machines 5 times a day almost like trying really very hard to break it.

    Outsourcing/procuring doesn’t mean pay the bill, lay back and chill. Expect people in a market where transaction starting at multimillion dollar to be as innocent as Adam and Eve is mind blogging. Your own engineers need to lead the project! Every kid understands that military needs drive the industry after a few episode of discovery, but I guess we Malaysian are just too damn special. And this is exactly why the whole support the local startup thing did not work. Local startups with their already weak background, even tries to cut every corner since no one cares, not even the one that pays the bill (yay!). Until the point that the organisation has to give up and went back to the OEM. Then of course the sour party will accuse of betraying the local industry. But hey, the fact is nothing works properly without the expats. FFS, it is so messed up that to a point where the OEM is kind enough to remind when a warranty claim deadline is due, begging them to take back their money.

    For 30 years of “modernization” we still relying on OEM for the simplest mod. Just simple maths, in house senior engineer in the rank tops at RM7k/mo plus benefits and design engineers are as low as 2K. Regardless of project complexity, OEM engineering rate is “as low as” $350/MH, plus administration fees of course. Integrating, a fancy word for installing, a HF comm on the above boats for example takes approximately 30 engineering and 30 production hours for standalone, doubles if fused, you do the maths. And now you know why every used asset procurement end up a failure and we are not able to take advantage of cheap equipment from a certain origin. At least one thing they learned, say no to OEM that cannot baby sit.

    The so called OEM certification gurus here tout about is also a joke. The organisation’s IMO supposed to be the one that certifies and OEM is the one that complies. While the user leads the way or at least participate/lobby or whatever you call it, to meet the requirement stipulated by QA and ultimately IMO. Now these agencies which supposed to certify equipment are doing paperwork buyback for most of the time among other desk jobs. Seemingly busy but utterly useless. They can live with a glaring manufacturing defect on their multimillion dollar machine without knowing it for years and at least the last time I saw is still there. Can’t even do an acceptance properly.

    Now do you still believe a civil agency can fix all these mess?

  7. SavvyKL,

    I think you are very wrong that 5 tonnes of H20 will last 20-25 sailors 3 days! You are talking 5000 litres.

    These boys are on patrol, not a luxury cruise. Take it from me, I live on the driest continent on earth.

    Each member can easily survive on app. 30l water a day, including a good shower. Toilets do not need potable water.

    A crew of 20-25 can survive on 600-700liters a day and that equates to 7 days plus!

    10 litres of water is a lot, just stand there at the tap and fill up a normal bucket and you will see what I mean.

  8. I know of several instances when the various services have performed their own modifications or other work because of delays on the part of the local agent or OEM. A long standing problem is that is not unheard, is for work to remain uncompleted due to issues with the local agents. There have also been instances when the OEM was not keen or delayed providing necessary certification; merely because the company selected to supply the gear was from another country or a competing company.

  9. H,

    ” Now do you still believe a civil agency can fix all these mess?”

    Yes, I do actually. The agency won’t be able to fix all the problems but it will be better than the current situation.

    “Everything they procure when shit arises, no one is taking responsibility.”

    Exactly. You’d be hard-pressed at the moment to pinpoint who — the MAF, Mindef civil servants, Treasury, politicians, all of the above, — are responsible for the mess that you mention above. Can you confidently point a finger at a specific player/organisation responsible for the mess you mention? Clearly having a single agency makes it much easier to pinpoint the culprit. If there’s a cock-up, in Malaysia, it’s finger pointing; in France, it’s the DGA; in Australia, the DMO.

    The professionals (engineers, analysts, managers) that are in the agency are there to make sure the buyers understand exactly what the seller is saying. This is the problem the French had. For example a report on the DGA, France’s acquisitions authority, found that sellers were able to overcharge the govt because of “knowledge asymmetries” between the buyers and sellers, and from then on decided to level the playing field by recruiting engineers and managers so that they can’t be conned. Another example, if the seller says that a more complex piece of equipment costs less to maintain than a simpler one, that ought to raise a red flag but at the moment that’s not happening. Perhaps because of too many ‘cooks’ in the process with each thinking the other is handling the anomaly.

    Overdependence on OEM is a separate issue. That’s for the local defence industry to look at but the agency can have an advisory role.

    I would prefer the agency be a civilian organisation — perhaps with retired military also as members so they understand what the military is saying because, let’s face it, some people have problems understanding what the military mean when they say “stand down” or “time on target” or “appreciation” — rather than a military one, and be required by law to report their activities.

  10. H, what a brilliant post! I am pretty sure it mirrors a lot of other civilian agencies,.

    IMO, petronas managed to do well by whatever system it uses (in comparison to other big malaysian companies). Pain in ass processes, but it ensures that those drilling platforms staying intact. Perhaps, the military can learn a few things. (though petronas pays a lot to keep their employees talent and loyalty, the military would be hard pressed to match that)

  11. Hi Ferret,

    Establishment defence acquisition agency is good idea, and by right should be, and i also think long time ago.
    but problem is Mindef can select asset base on there study and need.
    well Gov made decision base on “helping industry grow” and best offer/offset. some weapon may no mindef want, but provide best offer, offset or barter trade, weapom which can partner with local company, so Gov is very like it. other offer like setup local service center.
    also some other like Gov select give best TOT/IP to local company , although price very expensive for TOT/IP but due to “help local company technology” like AV8, Gowind project,Gov pay too much for TOT/IP cost.
    Is no wrong Gov helping local industry grow, but it must study local company capability and budget. at the end our defense budget use alot to helping local industry. means not get right asset for mindef 3 force.

  12. Sorry guys, not related to this topic.

    Defence Studies Blogspot now says France is in advanced discussion with M’sia and UAE for the Rafale. Apparently, they are confident of two more orders in the new year! Hopefully the MRCA torture will end soon.

    Reply
    For UAE maybe but not us

  13. TomTom,

    As you said these boys are on patrol boat, means there not only “work” there, but also stay at boat, there are no need fight get water for survivor life.
    My estimate 100 liter per-crew per-day just standard include 2x shower perday. not only shower we must thinking 24crew they only working in 40 meter boat, they need launch RIB for boarding/return job, maintenance crew, wash hand/face/shower clean up is normal, cooking water and wash food, kichen tools, dishes,cup.
    if 7 day than need install washing machine to wash clothes and use more water too.
    so i estimated 5 tons only can survice 3-4 day. as your said they can use for 7 day+ than they must keep saving water and not activity outside.
    as trend now, it not like in year 1960-2000 ship, more-more patrol boat/ship design more bigger tonnes, so can provide more rooms space, more daily tools, and most importance is bigger tons can have space install desalination system RO system, so can get un-district use of fresh water, even latest patrol ship have gym room, sauna rooms, every rooms have own shower rooms, so can give best crew life quality in boat and better living.

  14. It’s not “wrong helping the local industry grow” but it’s wrong when the military doesn’t get the needed or desired capability and the taxpayer doesn’t get his/her ringgit’s worth because the focus is on “helping” the local industry. It is taken that what we buy will be driven by political factors but it shouldn’t largely be driven by the needs of the local industry.

  15. SavvyKL,

    100l each man a day is way too bazir.

    I can send you a photo of my 5000l water tank if you like!

  16. Second repost. System doesn’t like links that start with http.

    H, …, SavvyKL,

    Here’s a link to a SIPRI paper (pdf) that reports on several countries’ procurement problems and possible solutions. Note that corruption and waste is at the top of the authors’ list of problems:

    http://www.sipri.org/research/armaments/milex/publications/unpubl_milex/unpubl_milex_default/procurement

    cheekucai,

    There’s nothing to stop the govt from recruiting smart people from Petronas, Khazanah or other GLCs to help with defence acquisitions.
    2% of GDP annually is not something to sneeze at and it’s time we got smart at acquisitions.

  17. water is one think, also need to see food store can keep many day food.
    one example US coast guard Sentinel-class cutter which base on Damen Stan 4708 patrol vessel. (about 10% large our new MMEA ship) with total 24 crew, fresh water about 6.4 tons. only operation at sea for 5 day with out re-supply.

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